What do we do with a problem like #Adani

Inside Story has run an updated and expanded version of my last post on Adani’s pretense that it is ready to start its mining project at a moment’s notice. The main new point is a suggestion for how a federal Labor government could close off the Galilee Basin without a general moratorium on new coal mines.

If federal Labor wins government in May (as seems highly likely), it will need to face up to the issue later this year. First of all, it will need to develop a coherent policy on phasing out coal exports — ideally involving a ban on new coalmines, though this is almost certainly too much for Labor to contemplate. That proposal also faces the counterargument, put forward by both mining companies and unions, that reduced Australian exports would be replaced by lower-quality coal from other countries.

The argument has some force, but there’s a way of taking it into account. Australia’s benchmark export is Newcastle coal, with an energy content of 6000 kilocalories per kilogram and a correspondingly low ash content. The premium for this higher-quality coal has risen greatly, though it has declined somewhat in recent years. Galilee Basin coal’s heat content, by contrast, is estimated at less than 5000 kcal/kg, and its ash content is 26 per cent, worse than coal from many competing countries. A policy that stops short of a blanket ban but requires new mines to supply coal of, say, 5500 kcal/kg or more would put an end to any idea of developing Galilee, while allowing for some smaller, higher-quality projects to proceed.

Further suggestions would be appreciated.

12 thoughts on “What do we do with a problem like #Adani

  1. Another option would be to re-evaluate the cleanup bond and increase it to match the actual cleanup cost of similar mines. I say this in near-complete ignorance of the topic, having only seen mention in the press of the bonds being insufficient.

  2. A snippet at the end sums it up.

    Keep some of the smaller, high quality projects going, but ease out the more enviro destructive or/ and financially dubious stuff.

    Perhaps we could have some akin as to the Murray Darling- greed would surely stifle a rational approach though?

  3. Generally I favor restrictions on the demand for carbon rather than supply restrictions – but there are smarter ways of providing supply restrictions than simply banning Adani. Obviously, given international substitution possibilities, you need a global approach.

    A problem with attempting to achieve an international agreement on climate policy is the existence of a set of non-complying countries. If a coalition of compliers (a ‘climate coalition’) restricts their use of carbon-based fuels then a general equilibrium effect is to reduce the price of fuels and to encourage extra usage outside the coalition. Effects on import-competing industries inside the coalition can be addressed by coalition countries applying border taxes on those goods they import from countries outside the coalition that reflect the non-internalised carbon taxes. Competitiveness disadvantages among exporters in the coalition countries can be dealt with by handing out free tradable carbon emission quotas. I strongly support such policies since, if implemented honestly, they are not protectionism. They ensure a level playing field in the world’s traded goods sectors, prevent carbon leakages from coalition to non-coalition countries and provide incentives for non-coalition countries to join the coalition – then they collect the carbon taxes rather than the governments of the coalition countries. .

    But such policies leave unaddressed the types of general equilibrium carbon leakages cited in the first paragraph. Fuels get cheaper when the climate coalition curtails their carbon use and this encourages use outside the coalition. If the coalition alone reduces its supply of carbon-based fuels then non-coalition countries will increase their supply. Non-coalition countries will experience inadequate incentives to invest in renewables and so on. One proposal is to allow trade in fossil fuel deposits before climate and trade policies are established. Coalition countries should then buy deposits in non-coalition countries and then not exploit them. The deposits selected should be the ones used which are least profitable since their owner will be willing to sell these cheaply – there are plenty of these available at present. The coalition can then reduce their supplies marginally without supposing non-coalition countries will increase theirs. Supply side leakages are eliminated. This will tend to equalize carbon prices across countries as well as marginal benefits from consumption. Thus trade distortions are also eliminated. Investments in technology also become efficient. The proposal is a bit like proposals for the North to buy back rainforests from the South – this works better than a timber boycott since this would reduce timber prices creating incentives for increased timber imports. The proposal is a bit like buying back emissions permits when agents undertake voluntary actions to reduce their emissions in a closed economy.

  4. The proposed idea is good. A further idea might be to ban any coal exports and coal terminals which might have a direct impact on the barrier reef. I mean all the impacts other than climate change itself. This would mean the cessation of North Queensland coal mining to help save the reef. As suggested elsewhere, build solar power in N.Q. and fund other projects to assist tropical ecological studies and research into sustainable tropical agriculture.

    It is clear that the Aussie climate is changing rapidly and dangerously right now. We will soon be overtaken by a fully developed climate crisis. We have run out of time.

  5. Of course you could simply put a levy on new coal exports, which would leave metallurgic coal still very viable but even a small levy would kill highly marginal projects such as Adani’s. That would allow them to keep the position they’re taking to the election – “We won’t stand in Adani’s way but we won’t subsidise them either”.

    Of course if you are correct that Adani is uneconomic anyway then they won’t need to do that. In fact I think the ALP in having that position are counting on Adani being abandoned for financial reasons. If you and they are wrong (it’s not clear yet) then the new government will indeed have a very ticklish political problem, of the sort that politicians commonly face through having refused to take a stand.

  6. Looking at history we can see the decisiveness with which governments faced the challenges of WW2, once the threats became patently real to them. In like manner, governments will only become decisive when the threats of climate change become patently real. A “patently real” threshold won’t be reached until nations like China and the USA face millions of internally displaced climate refugees. However, given lags and built-in warming, that will probably be too late.

  7. D-D, If Adani isn’t internationally competitive with your export tax then a marginally less efficient coal deposit will substitute for it internationally. The tax opens the door for such possibly-more-polluting competition. Australia cannot (even if it wanted to) resolve climate change by taking unilateral supply measures.

  8. Can I suggest looking at parenting books rather than negotiating-strategy ones? Climate change denial isn’t a reasoned position, it’s a years-long tantrum and has to be managed as such.

  9. hc, you’re arguing that the govt SHOULDN’T stop Adani, I’m arguing that whether they should or not they have an easy way to stop it if they want. Its a different argument.

  10. The idea to place a minimum standard on coalquality is a good one and one which would satisfy LNP dogma eg Australia produces a better cleaner product which, when compared with other countries, results in lower carbon emissions.

    Should get the mining mobs tick of approval 🙂

  11. dd, Not really. I am saying that such supply measures will have small (or even perverse) effects on global emissions because of the induced substitutions that will occur. Globally you have a continuum of coal supply options – knocking out one will lead to a switch towards the next less efficient and/or polluting on that continuum. Need a global approach and the one suggested (the idea is not mine) was for mitigating countries to buy out the low efficiency options.

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